UAE Law and Practice Contributed by: Amir Alkhaja, Gerry Rogers, Daria Selivanova and Danila Kriuchkov, Habib Al Mulla & Partners
Partnerships In a general partnership, all partners manage collectively (unlimited liability partners). In a lim - ited partnership, the general partner(s) manage the business, while limited partners do not par - ticipate in management decisions (to preserve their limited liability). These forms are seldom used by foreign investors. Branch Offices A branch does not have a board or separate managers; it operates under the authority of the parent company. However, it must appoint a general manager (or an in-charge) who is responsible vis-à-vis the UAE authorities. The branch manager effectively acts under a power of attorney from the parent and manages the local operations. Corporate Governance Practices UAE law does not require private companies to have independent directors or a two-tier struc - ture with a supervisory council. Only public listed companies must abide by corporate governance rules such as having independent directors. 3.5 Directors’, Officers’ and Shareholders’ Liability Directors’ and Officers’ Liability UAE company law imposes duties on directors (in JSCs) and managers (in LLCs) to act in the best interest of the company, within their author - ity, and with due care and diligence. They can be held liable to the company, shareholders, and third parties for certain breaches. Notably, under the Commercial Companies Law, directors/managers are liable for fraud, abuse of power, violation of the law or the company’s con - stitution, or gross negligence resulting in losses. Shareholders representing a requisite percent - age (usually 5% in a JSC) can bring a derivative
returns (usually quarterly) and maintain transac - tion records. There are also customs declara -
tions for goods import/export. 3.4 Management Structures
UAE companies generally use a one-tier man - agement structure. There is no mandatory dual board system. The available management
frameworks include the following. Limited Liability Company (LLC)
An LLC is managed by one or more manag - ers (who may also be referred to collectively as a “board of managers” if multiple). The LLC’s memorandum of association will specify the managers and their powers. It can be a single manager, multiple joint managers or a formal board. Managers can be UAE nationals or for - eigners – there is no nationality requirement for managers. They act as the executive manage - ment. LLCs do not require a separate supervi - sory board; the general meeting of shareholders oversees broad decisions (approving accounts, appointing managers, etc), while day-to-day authority is vested in the manager(s). Many LLCs simply have one managing director. Free Zone Companies Management structure depends on the free zone’s regulations. Most free zone LLCs (FZ- LLC or FZCO) are similar to mainland LLCs – they may appoint a general manager (as per licence) and can also have a board of directors if desired. For example, a DMCC company can have a board of directors (with meetings and resolutions) but it is not mandated to have more than one manager/director. Free zones generally allow flexibility: one individual can be the sole director and manager.
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